Chrysler-GM merger could cost 200,000 jobs

The uniting of General Motors and Chrysler LLC could mean the loss of as many as 200,000 jobs as cuts at the newly merged automaker spread to suppliers and other businesses.

According to Kimberly Rodriguez, automotive practice consultant with Grant Thornton LLP, the deal would close up to half of Chrysler’s factories and the axing of all vehicle lines except the minivans, Dodge Ram pickup and some Jeep models.

“Chrysler as we know it will cease to exist very soon,” Ms. Rodriguez said as she briefed reporters today. “There are few options available to either company.”

She went on to say, “Despite the significant number of families that will be impacted, the benefits of combining the two companies are both structural and strategic.”

The merged automakers would have an estimated one-third share of the U.S. light vehicle market and Rodriguez said a tentative deal could be struck as early as next Tuesday. Any implementation will still depend on a massive infusion of funds from the federal government and the refinancing of billions of dollars in debt.

Even with financing in place, the merger will face significant obstacles. Because its market share will make the new company so dominant, the merger will be likely to require government anti-trust approval under a new administration. The marriage will also require the blessing of the United Auto Workers union, which not only holds a $1.6 billion GM note but contractual obligations from General Motors and Chrysler regarding the Voluntary Employee Beneficiary Associations established in last year’s contracts with all three Detroit automakers. Furthermore, the new enterprise will have a total of more than 10,000 dealers, many of whom are protected by state laws against arbitrary termination of their franchises.

Without significant concessions on the part of the UAW and dealers, the merger could potentially require upwards of $50 billion in fresh cash and refinanced debt. The only alternative would be for both of the automakers to file bankruptcy and petition the court to allow them to void their union contracts and franchises and to shift billions of dollars in pension and retiree healthcare obligations to the federal government.